Zim on edge in an­tic­i­pa­tion of price hikes

ZIM­BABWE was on edge yes­ter­day in an­tic­i­pa­tion of fur­ther price hikes after the gov­ern­ment raised the price of fuel by more than 200 per­cent just a few hours after Fi­nance Min­is­ter Mthuli Ncube an­nounced that the coun­try was all but set to in­tro­duce a lo­cal cur­rency in the next 12 months as Harare bat­tles a de­bil­i­tat­ing cash crunch.

Hard cur­rency short­ages have grounded busi­ness and raised the cost of liv­ing for Zim­bab­weans as in­fla­tion – pro­pelled by a thriv­ing par­al­lel mar­ket for forex – wreaks havoc on the econ­omy.

Big com­pa­nies in Zim­babwe, such as ABInBev’s unit – Delta Cor­po­ra­tion – which is owed about $120 mil­lion (R1.6 bil­lion) in un­remit­ted div­i­dends, have hiked prices.

The gov­ern­ment of Pres­i­dent Em­mer­son Mnan­gagwa has re­sisted re-dol­lar­i­sa­tion of the econ­omy and at the week­end Ncube said Zim­babwe would have its own cur­rency in the next 12 months. This was de­spite grow­ing calls for full dol­lar­i­sa­tion or adop­tion of in­creased usage of the rand in that coun­try.

“We should be close on cur­rency re­forms. We are less than 12 months away from cur­rency re­forms,” Ncube said on Fri­day.

“On the is­sue of rais­ing enough for­eign cur­rency to in­tro­duce the new cur­rency, we are on our way al­ready; give us months, not years.”

Zim­babwe ditched its own cur­rency after it was rav­aged by hy­per-in­fla­tion in 2009 un­der for­mer pres­i­dent Robert Mu­gabe, who was ousted by the mil­i­tary to pave way for Mnan­gagwa in Novem­ber 2017.

The min­eral-rich south­ern African coun­try, bank­ing on gold, to­bacco, di­a­monds and chrome, has been us­ing mul­ti­ple re­gional and in­ter­na­tional cur­ren­cies, along­side the quasi-lo­cal cur­rency, the bond note, as le­gal ten­der. The bond notes have been los­ing ground and the gov­ern­ment has been blamed for print­ing more value into the lo­cal unit through hav­ing ex­ces­sive elec­tronic bank bal­ances via overblown is­suance of trea­sury bills.

With prices sky­rock­et­ing and fuel short­ages halt­ing eco­nomic ac­tiv­ity, Mnan­gagwa on Satur­day night raised the price of fuel from $1.30 to nearly $3.30, which puts the price of fuel in terms of the par­al­lel mar­ket rate at about $1 per litre.

“These prices are pred­i­cated … on the need to keep fuel re­tail­ers vi­brant. Tourists will fuel and re­fuel at des­ig­nated points at the price of $1.32 for petrol,” Mnan­gagwa said.

He added that the fuel short­ages that had re­sulted in long queues and which had dis­turbed busi­ness op­er­a­tions for lo­cal com­pa­nies had been wors­ened by “il­le­gal cur­rency and fuel trad­ing ac­tiv­i­ties” on par­al­lel and in­for­mal mar­kets.

Al­though the gov­ern­ment was not ex­pect­ing fur­ther price in­creases, most econ­o­mists and busi­ness ex­ec­u­tives told Busi­ness Re­port that the fuel price hike would have knock-on ef­fects on prices, with busi­nesses pass­ing on the costs to con­sumers.

I SIM­PHIWE MBOKAZI African News Agency (ANA)

ZIM­BABWE’S Min­is­ter of Fi­nance, Mthuli Ncube, says the coun­try will have its own cur­rency in the next 12 months.